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I’m not arguing the judgment was unfair and I’m not asserting that musk and the board acted wisely, prudently or even ethically. But the guy just got robbed of

by efitz 3y ago

I’m not arguing the judgment was unfair and I’m not asserting that musk and the board acted wisely, prudently or even ethically. But the guy just got robbed of his compensation after increasing the value of the company’s stock by 10x. In return for accomplishing this he was supposed to get 6% equity. That does not sound to me like the plaintiffs suffered actual losses.

bhouston 3y ago
The judge said his compensation was that he owned 21% of Tesla so that he already received $10B for every $50B he increased Tesla’s value. Awarding more stock to Musk was just depriving the other stock holders of their value.
- Taek 3y ago
  That doesn't seem like the judge was acting in the fiduciary interest of Tesal. It seems like the judge was acting in the interest of stopping corporate greed. The judge had multiple quotes to that effect, including "Is the richest man on Earth overpaid?" - that's not a question you ask for matters of fiduciary responsibility, because it completely ignores the question of how valuable Musk is to Tesla.
  - bhouston 3y ago
    The judge makes clear that he thinks that Musk was likely to stay CEO of Tesla whether or not this pay package occurred. It was already in Musk’s interest to stay given his shareholdings. Remember that this growth of Tesla brought Musk $120B of wealth given his existing shareholdings. That is already a lot of compensation for a job well done.
    - s1artibartfast 3y ago
      Which is an interesting argument. If the board should reject any deals, even mutually beneficial ones, because they already have someone in golden handcuffs, then Mutual assured destruction is the only leverage remaining.
      - Taek 3y ago
        Your comment got downvoted (probably because MAD as the only remaining option is strong hyperbole) but the core thrust is sensible. Knowing that a CEO is not going to leave isn't the only relevant factor in discussing increasing CEO comp. Any decent manager understands this about their employees. You may be 100% confident that they won't quit if you don't give them a bonus and also be 100% confident that giving them a bonus (due to moral, motivation, evangelism, etc) is the best outcome for the company anyway. Musk had other companies that were splitting his focus. Sure, without that 6% he'd still be CEO of Tesla. But would he have put more energy instead into SpaceX? Boring Company? Nerualink? OpenAI? When your CEO has so many places to focus his attention, giving him more equity to remain the preferred child makes a lot of sense as a mutually beneficial agreement. *Especially* when that increased compensation is directly tied to performance. And not a trivial outcome, but a serious outcome that brings hundreds of billions of dollars to shareholders.
        aw1621107 3y ago
        > When your CEO has so many places to focus his attention, giving him more equity to remain the preferred child makes a lot of sense as a mutually beneficial agreement. Alternatively, you could simply condition the compensation on spending a certain amount of time/attention on Tesla. That seems like a much more straightforwards solution of keeping Musk's attention were actually a concern. Perhaps that would warrant a further bump in compensation, but in exchange you get certainty.
        AlchemistCamp 3y ago
        Basing CEO compensation on time spent instead of performance is a horrible idea, IMO.
        aw1621107 3y ago
        Basing CEO compensation only on time spent may seem like a bad idea, sure, but there's nothing that prevents you from stipulating both performance and time/attention metrics. You may have to offer more equity, but that's all part and parcel of negotiations.
  - hindsightbias 3y ago
    The board had a fiduciary interest and did what was best for Elon. They had no rational other than “I love the guy” and “it’s what he wanted.” The judges only interest is having to act in the best interest in shareholders in the absence of the board performing their duty.
    - kklisura 3y ago
      "I love the guy" is an understatement... > The working group included management members who were beholden to Musk, such as General Counsel Todd Maron who was Musk’s former divorce attorney and whose admiration for Musk moved him to tears during his deposition. [1] [1] https://courts.delaware.gov/Opinions/Download.aspx?id=359340 https://courts.delaware.gov/Opinions/Download.aspx?id=359340
- efitz 3y ago
  The last 4 companies I worked for bought back stock all the time…
  - helsinkiandrew 3y ago
    > The last 4 companies I worked for bought back stock all the time… That effects all shareholders equally - the remaining shares are worth a little more. Awarding more stock reduces the percentage of the company each of the remaining shares is worth.
syntaxing 3y ago
The document explains this in the first couple paragraphs…
MP_1729 3y ago
Definitely not the case. Shareholders got back what was theirs of right. Dozens of CEOs, including CEOs of much larger companies like Satya Nadella and Tim Cook, got $2.2B in stock options that ended up being worth $55B. But I want to stress that no one, ever, got a salary of $2.2B. Satya Nadella just now have crossed the $1B compensation mark. The market is full of CEOs that 10x-ed their companies' share prices and all they get is a decent salary.
- AlchemistCamp 3y ago
  Which other CEOs of companies as large as Tesla have 10x-ed their company’s share price in just five years?
  - bmitc 3y ago
    Perhaps share price is not a good metric? And it would actually explain a lot of Musk's behavior in manipulating the stock price.
    - mlindner 3y ago
      Share price wasn't the metric used to determine the compensation though. It was revenue growth.
    - AlchemistCamp 3y ago
      Given that the discussion is about whether or not the shareholder’s interests were violated, share price is a pretty good metric in this case.
      - bmitc 3y ago
        Shareholder interests go beyond pump and dumping a stock.
  - esoterica 3y ago
    Nvidia is more than twice the size of Tesla currently and 17xed over the last 5 years.
sidcool 3y ago
Genuinely curious. Did it mean that Musk wanted the money to be taken from shareholders and be given him instead? That cannot be legal right? Even for the most capitalistic systems. Or am I getting it wrong?
- AlchemistCamp 3y ago
  You’re getting it wrong. Him getting the options was contingent on making the shareholders a lot more money. The stock options were contingent upon dramatically increasing the value of the shares (despite the total number of shares increasing). There was no scenario in which the shareholders could lose money from the comp package. Even in the case where the company didn’t grow, they wouldn’t since he’d have gotten no compensation at all.
  - josefx 3y ago
    > There was no scenario in which the shareholders could lose money from the comp package. Even in the case where the company didn’t grow If I understand other comments correctly then one problem was that the growth was predicted before Musk and friends wrote up the comp package. So money that was supposed to go to the shareholders was redirected into Musks pockets.
    - s1artibartfast 3y ago
      >If I understand other comments correctly then one problem was that the growth was predicted before Musk and friends wrote up the comp package. not at all. the growth was not predicted, and most thought the deal was crazy (CEOs make deals that are never achieved all the time). One argument was that the deal wasnt fair because Elon wouldnt work harder for an extra 50 billion, because he already stood to make 100 billion if he hit the milestones. Like any company, any money that isn't spent on compensation belongs to the shareholders.
      - gpm 3y ago
        The growth was absolutely predicted as to the first tranches, to quote the ruling > Tesla determined that three operational milestones were “considered probable of achievement,” which meant that they were greater than 70% probable of achievement within approximately one year of the Grant date > [...] > Defendants failed to prove the factual predicate for their argument that all the milestones were “ambitious” and difficult to achieve.
bmitc 3y ago
"Robbed" is an extremely charitable interpretation of anything here.

by efitz 3y ago

bhouston 3y ago

The judge said his compensation was that he owned 21% of Tesla so that he already received $10B for every $50B he increased Tesla’s value. Awarding more stock to Musk was just depriving the other stock holders of their value.

Taek 3y ago
That doesn't seem like the judge was acting in the fiduciary interest of Tesal. It seems like the judge was acting in the interest of stopping corporate greed. The judge had multiple quotes to that effect, including "Is the richest man on Earth overpaid?" - that's not a question you ask for matters of fiduciary responsibility, because it completely ignores the question of how valuable Musk is to Tesla.
- bhouston 3y ago
  The judge makes clear that he thinks that Musk was likely to stay CEO of Tesla whether or not this pay package occurred. It was already in Musk’s interest to stay given his shareholdings. Remember that this growth of Tesla brought Musk $120B of wealth given his existing shareholdings. That is already a lot of compensation for a job well done.
  - s1artibartfast 3y ago
    Which is an interesting argument. If the board should reject any deals, even mutually beneficial ones, because they already have someone in golden handcuffs, then Mutual assured destruction is the only leverage remaining.
    - Taek 3y ago
      Your comment got downvoted (probably because MAD as the only remaining option is strong hyperbole) but the core thrust is sensible. Knowing that a CEO is not going to leave isn't the only relevant factor in discussing increasing CEO comp. Any decent manager understands this about their employees. You may be 100% confident that they won't quit if you don't give them a bonus and also be 100% confident that giving them a bonus (due to moral, motivation, evangelism, etc) is the best outcome for the company anyway. Musk had other companies that were splitting his focus. Sure, without that 6% he'd still be CEO of Tesla. But would he have put more energy instead into SpaceX? Boring Company? Nerualink? OpenAI? When your CEO has so many places to focus his attention, giving him more equity to remain the preferred child makes a lot of sense as a mutually beneficial agreement. *Especially* when that increased compensation is directly tied to performance. And not a trivial outcome, but a serious outcome that brings hundreds of billions of dollars to shareholders.
      - aw1621107 3y ago
        > When your CEO has so many places to focus his attention, giving him more equity to remain the preferred child makes a lot of sense as a mutually beneficial agreement. Alternatively, you could simply condition the compensation on spending a certain amount of time/attention on Tesla. That seems like a much more straightforwards solution of keeping Musk's attention were actually a concern. Perhaps that would warrant a further bump in compensation, but in exchange you get certainty.
        AlchemistCamp 3y ago
        Basing CEO compensation on time spent instead of performance is a horrible idea, IMO.
        aw1621107 3y ago
        Basing CEO compensation only on time spent may seem like a bad idea, sure, but there's nothing that prevents you from stipulating both performance and time/attention metrics. You may have to offer more equity, but that's all part and parcel of negotiations.
- hindsightbias 3y ago
  The board had a fiduciary interest and did what was best for Elon. They had no rational other than “I love the guy” and “it’s what he wanted.” The judges only interest is having to act in the best interest in shareholders in the absence of the board performing their duty.
  - kklisura 3y ago
    "I love the guy" is an understatement... > The working group included management members who were beholden to Musk, such as General Counsel Todd Maron who was Musk’s former divorce attorney and whose admiration for Musk moved him to tears during his deposition. [1] [1] https://courts.delaware.gov/Opinions/Download.aspx?id=359340 https://courts.delaware.gov/Opinions/Download.aspx?id=359340
efitz 3y ago
The last 4 companies I worked for bought back stock all the time…
- helsinkiandrew 3y ago
  > The last 4 companies I worked for bought back stock all the time… That effects all shareholders equally - the remaining shares are worth a little more. Awarding more stock reduces the percentage of the company each of the remaining shares is worth.

syntaxing 3y ago

The document explains this in the first couple paragraphs…

MP_1729 3y ago

Definitely not the case. Shareholders got back what was theirs of right. Dozens of CEOs, including CEOs of much larger companies like Satya Nadella and Tim Cook, got $2.2B in stock options that ended up being worth $55B. But I want to stress that no one, ever, got a salary of $2.2B. Satya Nadella just now have crossed the $1B compensation mark. The market is full of CEOs that 10x-ed their companies' share prices and all they get is a decent salary.

AlchemistCamp 3y ago
Which other CEOs of companies as large as Tesla have 10x-ed their company’s share price in just five years?
- bmitc 3y ago
  Perhaps share price is not a good metric? And it would actually explain a lot of Musk's behavior in manipulating the stock price.
  - mlindner 3y ago
    Share price wasn't the metric used to determine the compensation though. It was revenue growth.
  - AlchemistCamp 3y ago
    Given that the discussion is about whether or not the shareholder’s interests were violated, share price is a pretty good metric in this case.
    - bmitc 3y ago
      Shareholder interests go beyond pump and dumping a stock.
- esoterica 3y ago
  Nvidia is more than twice the size of Tesla currently and 17xed over the last 5 years.

sidcool 3y ago

Genuinely curious. Did it mean that Musk wanted the money to be taken from shareholders and be given him instead? That cannot be legal right? Even for the most capitalistic systems. Or am I getting it wrong?

AlchemistCamp 3y ago
You’re getting it wrong. Him getting the options was contingent on making the shareholders a lot more money. The stock options were contingent upon dramatically increasing the value of the shares (despite the total number of shares increasing). There was no scenario in which the shareholders could lose money from the comp package. Even in the case where the company didn’t grow, they wouldn’t since he’d have gotten no compensation at all.
- josefx 3y ago
  > There was no scenario in which the shareholders could lose money from the comp package. Even in the case where the company didn’t grow If I understand other comments correctly then one problem was that the growth was predicted before Musk and friends wrote up the comp package. So money that was supposed to go to the shareholders was redirected into Musks pockets.
  - s1artibartfast 3y ago
    >If I understand other comments correctly then one problem was that the growth was predicted before Musk and friends wrote up the comp package. not at all. the growth was not predicted, and most thought the deal was crazy (CEOs make deals that are never achieved all the time). One argument was that the deal wasnt fair because Elon wouldnt work harder for an extra 50 billion, because he already stood to make 100 billion if he hit the milestones. Like any company, any money that isn't spent on compensation belongs to the shareholders.
    - gpm 3y ago
      The growth was absolutely predicted as to the first tranches, to quote the ruling > Tesla determined that three operational milestones were “considered probable of achievement,” which meant that they were greater than 70% probable of achievement within approximately one year of the Grant date > [...] > Defendants failed to prove the factual predicate for their argument that all the milestones were “ambitious” and difficult to achieve.

bmitc 3y ago

"Robbed" is an extremely charitable interpretation of anything here.